1. Capital budgeting decisons primarily affect

   Long term assets on the balance sheet

   Short-term debt on the balance sheet

   Total liabilities on the balance sheet

   Common equity on the balance sheet

1. Which of the following forms of business organization are double taxed?

   Sole proprietorship

   Limited liability company (LLC)

   C-corporation

   All of the above are double taxed

1. Which of the following factors or activities can be controlled by the managers of the firm?

   Capital budgeting

   The level of economic activity

   The level of interest rates

   Laws and regulations

1. Why is maximizing profits NOT an appropriate goal for the financial manager?

   Because profits are too easy to maximize

   Because profits have nothing to do with debt outstanding

   Because profits are a function of accounting rules and may not represent cash flow

   Beacause profits are too hard to measure in the long run

1. Which of the following are ways to mitigate the agency problem in corporations?

   Executive compensation plans

   Fear of firing and loss of reputation

   Monitoring by the board of directors

   All of the above